Use the figure below to answer the following question(s).
Figure 14-2

-If the Fed anticipates that the conditions illustrated by AD₂ and SRAS in Figure 14-2 will be present in the near future,it should
A)decrease the discount rate.
B)reduce reserve requirements.
C)sell U.S.treasury bonds on the open market.
D)buy U.S.treasury bonds on the open market.

Question

Use the figure below to answer the following question(s).
Figure 14-2
 
-If the Fed anticipates that the conditions illustrated by AD₂ and SRAS in Figure 14-2 will be present in the near future,it should
A)decrease the discount rate. 
B)reduce reserve requirements. 
C)sell U.S.treasury bonds on the open market. 
D)buy U.S.treasury bonds on the open market.

Quizplus · Accepted Answer

Selling U.S. treasury bonds on the open market is a contractionary monetary policy action that the Fed would take if it anticipates inflationary pressures, as it reduces the money supply and increases interest rates.

Use the Figure Below to Answer the Following Question(s)